A Gucci handbag may sell for $60 in Italy and $240 in the United States.It must add the cost of transportation,tariffs,importer margin,wholesaler margin,and retailer margin to its factory price.Gucci faces a problem.

Question

Quizplus · Accepted Answer

Price escalation occurs when a product's price increases as it moves through the distribution channels due to additional costs such as transportation, tariffs, and margins. In this case, Gucci's handbags face price escalation as they are sold at a much higher price in the US than in Italy due to the added costs of importing and distribution.

A Gucci Handbag May Sell for $60 in Italy and $240